Foreclosure activity in the U.S. has dropped quite a bit over the last few years. There are still hundreds of thousands of houses throughout the country that are in foreclosure.
Are you interested in buying a foreclosed home? Are you worried about the extra steps involved in the process? Do you want to make sure you’re choosing the right home for your family?
No matter what your qualms are about buying a foreclosed home, we’ve got answers that will put you at ease.
Read on for some tips that will help you through the process and ensure you get the house you want at the right price.
Why Buy a Foreclosed Home?
There are plenty of reasons why you might want to buy a foreclosed home. Some of the greatest benefits of purchasing a house that’s in foreclosure include:
- You can often get a great deal since banks want to get rid of these houses as quickly as possible
- You may get better financing options and lower monthly payments
- You can get a higher return on your investment since you’re buying at such a low price
- You may have the opportunity to buy a bigger house than what you could normally afford and live in a nicer neighborhood
The process of buying a foreclosed home can be long and complex. Many people find that it’s worth it, though, since it comes with all these benefits.
Top 7 Tips for Buying a Foreclosed Home
Do you want to enjoy the benefits that come with buying a foreclosed home? If so, be sure to follow these tips:
1. Get Your Loan Approved First
When you’re buying a foreclosed home, one of the best things you can do is get your financing lined up early on.
Foreclosed homes are owned by the bank, and the same bank that owns the home won’t finance the property to another buyer. Because of this, you’ll need to secure a loan from another lender before you begin shopping.
Find a letter and get pre-approved right away to show the bank that you’re a serious buyer. It helps to have your earnest money ready to go, too.
2. Find the Right Agent
The right real estate agent can make the home buying process much easier, especially when you’re looking into buying a foreclosed home.
Foreclosed homes tend to go off the market quickly, so you need an agent who has experience selling them.
The right agent will be able to guide you through the process and help you find a home that meets your needs and fits your budget.
They will also likely have access to upcoming foreclosures that haven’t been listed yet. This will give you an advantage and help you get a head start over other buyers.
3. Inspect it Inside and Out
When you’re buying any kind of home, you need to be diligent about the inspection process. This is especially important when you’re buying a foreclosed home, though.
Look carefully at the house — both inside and out — when you start shopping and take note of any issues or repairs that will need to be made.
Remember, foreclosed homes are sold as-is. Because of this, you’ll be responsible for handling repairs and getting the house up to code.
4. Consider the Neighborhood
Consider the neighborhood in which a foreclosed home is located before you decide to buy it.
The neighborhood will have an impact on the resale value or rental price of the home. It will also affect your experience as a homeowner if you decide to live in that house long-term.
Think about the state of other houses in the neighborhood, as well as your access to businesses, grocery stores, and your office. Be sure to consider factors like the noise level and crime rates of the area, too.
5. Consider Buying a HUD Home
When you’re shopping for foreclosed homes, it’s a good idea to take a look at the Department of Housing and Urban Development’s website.
The HUD website features properties that were foreclosed on homeowners with government-backed loans. You can find lots of great deals on homes listed on the HUD website.
Remember that you need a realtor before you can bid on them, though. These properties don’t stick around long, either. Because of this, you’ll need to act fast if you want to secure one for yourself and your family.
6. Budget Carefully
It’s true that, when you buy a foreclosed house, you can often get a better deal than you’d get buying another property in the same neighborhood.
The cost of the house is not the only expense you need to worry about when you’re shopping, though.
There are lots of other things you’ll need to pay for along the way. This includes any repairs that the property needs. There may be contingencies associated with the sale of the house as well.
Make sure you have plenty of money set aside to cover these costs so you can purchase the house without any problems.
7. Factor in Financing Restrictions
Whether you’re buying a foreclosed home for yourself or are a real estate investor working for a company that claims, “we buy any house,” it’s important to know that there are financing restrictions associated with these purchases.
In order to close the loan, your lender will likely require you to make repairs to the home and get it up to code.
Since the bank that owns the home won’t foot the bill for these repairs, you’ll be responsible for funding them. If you don’t have the cash to fund them, you’ll need to apply for a loan, such as a 203(k) loan, to cover the costs of the repairs.
203(k) loans are one of the best options if you find yourself in this situation, as they’re backed by HUD. There are a lot of rules that come with these loans, though, so be prepared to jump through some hoops.
Buy a Foreclosed Home Today
The process of buying a foreclosed home might seem intimidating at first. It’s not as difficult as you might think, though, especially if you keep these tips in mind.
Are you ready to buy a foreclosed home? Do you want to learn more about the home buying process before you make a final decision?
Either way, we’ve got resources for you on our site. Check out some of our real estate articles today for more advice to help you buy the right home for yourself and your family.
